Digitalization and its impacts on the human resource

management

Thesis

By

Lolita Onayeva

Submitted in Partial fulfillment

Of the Requirements for the degree of Bachelor of Science
In
Business Administration

State University of New York

Empire State College

2017

Reader: David Starr-Glass

 Acknowledgements

I would like to express my special thanks of gratitude to my professor David Starr-Glass for the

support and motivation. His guidance helped me to clarify directions of my thesis.

Besides my advisor, I would like to thank such intelligent and enthusiastic professionals

Angelica Gamidova and Jeff Medeiros for the opportunity to interview them. That was an honor

to me to spend some hours talking with such interesting, smart people who are fully dedicated

to their jobs.

Last, but not the least, I would like to express my gratitude to my family and friends for

supporting me throughout my life.

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Table of Contents

Abstract……………………………………………………………………………..5

Chapter 1:
Introduction………………………………………………………………………...7

Chapter 2: The impact of digitalization on future cuts in the employment sector

and resulting increased unemployment
2.1Introduction………………...…………………………………………………….9
2.2 The possibility that digitalization will lead to a significantly higher rate of
unemployment……………………………………………………………………….9
2.3 Jobs that are at risk from computerization……………………………………..10
2.4 Internet and its effect on the working environment …........................................12
2.5 Gig economy…………………………………………………………………...13

Chapter 3: How digitalization changes the traditional approach to jobs

3.1 Introduction………………………………………………………………….…19
3.2 Shifting to more flexible jobs (freelance, self-employment, working part-time
from home, task orientation)………………………………………………….……19
3.3 New skills that create new job titles………………………..……………….….24
3.4 Digitalization has no limitations regarding geography, demography, or
gender……………………………………………………………………….….27

Chapter 4: Policies, regulations and possible issues

4.1 Introduction………………………………………………………………….…31
4.2 Adjustments to new types of employment………………………………..……31
4.3 Social, health and safety protection under digitalization………..……………..33
4.4 Rights of employees and employers’ responsibilities……………..…………...40

Chapter 5: The potential challenges and opportunities for employers

5.1Introduction…………………………………………………………………......41
5.2 Challenges for employers: the “psychological contract”…………..…………..43
5.3 Online talent platforms: types and aims…………………………..……………44
5.4 Better and more qualified matching between companies and employees…...…47
5.5 Reduction in the cost of employment/recruitment………..……………………50
5.6 Determining future skills and employee training…………………………..…..53

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 Chapter 6: Practical part
6.Interviews……………………………………………………………...…..……56

Chapter 7: Conclusion
7.1Conclusion…………………………………………………………………….67

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Abstract

Doubtless, the nature of the work environment is changing dramatically and rapidly.

New innovations, increasing levels of robotization and automatization, and the

widespread use of the Internet are crucial factors that are causing these shifts. The

digitalization of the twenty-first century will have a significant impact on “the big

picture” for employees and their work environments in the future.

Firstly, the development of innovations and automatization has led to cuts in the

employment sector. Robots and machines that use Artificial Intelligence (AI) may

replace a huge number of currently employed individuals. It is predicted that machines

will fill many positions that are now occupied by humans. Hence, there is the threat that

robotization will negatively impact workers in terms of increasing unemployment rates.

Secondly, digitalization changes the traditional approach work. Innovations lead to new

trends in employment arrangements, such as freelance, self-employment, contractor,

etc. Such a trend is seen as both positive (at first glance) and a negative (after deeper

research). It is assumed that employees get more flexible conditions and a wider range

of choice; however, this is controversial due to the fact that workers do not have a stable

job with guaranteed benefits (a fixed salary or wage, or social protection and insurance).

Another change that has appeared from new types of employment involves legislative

issues. Because of a lack of policies and regulations, new types of employees

experience inconveniences such as a low level of social protection, a lack of insurance,

and unstable payment from employers. These issues create an unhealthy environment

and cause significant shifts in the nature of work itself.

Also, digitalization seems more beneficial for employers rather than employees because

it puts aside companies’ responsibilities towards their workers. Also, online talent

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platforms allow employers to view a wider selection of potential employees. However,

more employees are steadily becoming self-employed individuals who switch jobs at

least once every few years. Hence, they are not interested in the success of the entity

they are working for because they realize that they will not be a part of it for the long

term. This fact results in a situation in which many employees escape their

psychological contract obligations. As a result, such workers do not feel the

responsibility to work at their full potential. Hence, it could be claimed that

digitalization also creates some negative issues for employers.

The aim of this work is to analyze how digitalization impacts shifts in the employment

environment. To obtain a clearer picture, the paper observes these changes from both

the employees’ and employers’ sides.

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Chapter 1

Introduction

Digitalization is causing significant changes in the nature of the employment

environment, having especially strong effects on the human resource (HR) sector. There

are a lot of opinions on, and predictions about, significant shifts in the labor market in

the near future. It is expected that machines will replace a huge number of jobs; hence,

the level of unemployment will dramatically increase. Machines have already occupied

a lot of finance-related jobs, and it is expected that the whole banking sector will

become automated. Also, new types of employment arrangements (freelancers, the self-

employed, contractors), which have appeared due to the development of the Internet and

other innovations, cause both threats and opportunities to arise for employers and

workers. From one side, the new types of employment are seen to offer a more flexible

schedule, but, from another side, the absence of standards in terms of office hours, sick-

leave, etc., may negatively impact the mental and physical health of such employees.

The aim of this work is to analyze the impact of digitalization on the shifts and changes

in the employment environment, specifically on employees and employers.

The first chapter provides the general picture of shifts in the employment environment

that are caused by the development of innovations, robotization and AI. It also focuses

on predictions made by authorities such as Frey and Osborne about possible changes to

and cuts in jobs in the future. It then provides data on the jobs that are at higher risk

from automatization and computer algorithms.

The next chapter’s aim is to explain how digitalization changes traditional jobs into new

types of employment. It covers new types of employment arrangements, such as

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freelancers, self-employment, crowdsourcing, contractors, etc., explaining the potential

benefits and challenges for employees. Also, it describes new skills that are needed by

employees to stay on the labor market.

Later the paper provides a discussion about the legislative challenges that occur with

new types of employment arrangements, and its influence on the confidence and

productivity of workers. The new types of employment arrangements do not offer

employees enough protection and lack legislative policies; hence, the question about the

employers’ responsibilities becomes crucial.

Then the paper shifts from the employees’ perspectives and discusses the impact of

digitalization on employers, taking into consideration mental obligations between

companies and employees known as a “psychological contract”. It focuses on the

potential challenges that an employer may encounter, such as a lack of loyalty from its

employees, who do not feel part of the company (due to the frequently changing nature

of employment).

The paper also provides some views on the current labor market from HR managers in

the form of interviews. This part aims to obtain more opinions on the changes in the

nature of employment.

Lastly, the paper provides a conclusion about and discussion on the effects of

digitalization on both employees and employers.

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 Chapter 2

The impact of digitalization on future cuts in the employment sector and resulting

increased unemployment

This chapter focuses on the impact of digitalization on future shifts in the employment

sector. It mainly describes negative predictions of cuts in the existing labor market,

possible risks associated with computerization and alternative positive aspects of

implementing new technologies. This section identifies the change from a traditional

approach to employment to a new one that mostly depends on such machines and

technologies. The term 'Gig Economy' and its effect on the future of employees and

employers are also analyzed. The chapter also uses the analysis and critique of Frey and

Osborne by the Organisation for Economic Co-operation and Development (OECD)

report that provides more accurate data on future shifts in the labor market, applying the

task-oriented approach instead of the occupation-based one. This report enables us to

understand the essential values contained in the labor market.

The possibility that digitalization will lead to a significantly higher rate of

unemployment

Digitalization includes such aspects as automatization, robotization and the effect of the

Internet on the development to society. The significantly rapid growth of technological

innovations has dramatically shifted demand in the labor market.

The main characteristic of digitalization's impact on employment and skills requirement

is the polarization of the labor market. Studies presented in the ‘Employment and Skills

Aspects of the Digital Single Market Strategy' (Valsamis, Coen, Vanoeteren & Beken,

2015, p.36-37), show that there is a high demand for high-skilled workers, because they

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can manage new technologies and data processing, whilst the need for medium-skilled

employees, such as manufacturing production workers or administrative clerks, is

decreasing, because they can be replaced by new technologies. The number of low-

skilled workers is expected to be boosted as well due to the growth of app-based

services that need cheap labor to accomplish simple tasks. Therefore, the medium-

skilled group is supposed to shift to either alternative group, by obtaining higher

qualifications or agreeing to a lower wage.

Jobs that are at risk from computerization

Automation is seen as a destructive tool due to its ability to replace human beings in

more than 50% of occupations. Machines and robots today may perform many tasks in

the manufacturing, military and health sectors. Technological progress is enabling

computers to manage different operations that were previously done only by humans.

Hence, there is the possibility that as machines evolution, they will entirely replace

people from an enormous number of occupations. So, automatization and new,

alternative approaches are predicted to replace people in a huge number of employment

positions. As a result, many employees will lose their jobs, and the unemployment rate

will increase. By way of illustration, the most up-to-date studies in the field of

employment have predicted potential job losses of approximately 35% in the UK due to

digitalization, with the sectors most at risk being office and administrative support,

transportation, sales, service, construction, extraction and production (Valsamis et al.,

2015, p. 20). The authors of the Citi GPS report have also argued that the future of jobs

in the service sector that involve repetitive actions, such as data or journal entries, are at

highest risk of being replaced by automatization. Michael Osborne and Carl Benedikt

Frey (2015) expect 58% of office and administrative work to be at risk from automation

(p. 30). High rates of unemployment may cause unpredictable issues for governments

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due to the need for pensions and a dramatic increase in benefits for such groups of

people. Hence, a demand for higher taxation and budget cuts may occur

However, from the side of companies, automatization is key to success, because it will

allow them to cut costs associated with employment, recruitment and training.

Corporations will not be liable to provide machines with pensions, health insurance,

sick leave or vacations; therefore, productivity will increase while responsibilities will

be reduced to a minimum. Companies encourage the development of robotic machines,

benefiting from the progress of the innovations sector. Being able to replace humans in

manufacturing, for instance, a company may increase total output, the quality of

products and the cost of it for the consumer. The cost of HR and other departments will

dramatically decrease as well, enabling companies to allocate more to the

manufacturing process.

3D printing is also an innovation that is making an enormous contribution to the

production process. It allows a huge range of different things to be created much faster

and cheaper than by traditional human methods.

Many would perceive automatization and robotization as a destructive wave of the 21st

century, causing job losses and increasing overall unemployment, making the poor

poorer and the rich richer. Many would argue against such a stand point, however,

because of the numerous benefits from new technological breakthroughs. The health

sector is a great case in point and has many new technological aids that allow people to

get more accurate and qualified treatment. Furthermore, thanks to digitalization in

medical care, many complicated surgical operations and procedures have become

possible. Another example is how some robots today are adapted to help disabled

people who are paralyzed, or have lost part of their bodily functions, to live a normal

life. However, the authors of the Citi GPS report have proposed that overall

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employment in the health care sector will decrease due to innovations such as ‘remote

health monitoring' that will allow the tracking of patients at home, and that as a result

will reduce both the number of care workers needed and of hospitals (Osborne & Frey,

2015, p.32).

Another area where robots have started replacing humans is in the military. Albeit

controversially, flying drones are employed to destroy dangerous targets, such as

terrorists, in war zones. While on the one hand the aim is to protect conventional pilots,

on the other hand drone pilots may be many thousands of kilometers away and may not

consider certain facts and kill innocent people by mistake. That said, there is still at

least some element of the human factor now, but if future innovations allow drones to

make decisions autonomously, there is a huge potential for ethical and security issues

for the military sector to have to consider. Even such low-skilled occupations as

cleaning services are slowly being replaced by robots; there will potentially be no need

for maids, gardeners, or cooks. Machines could do such jobs faster and at a lower cost.

Internet and its effect on the working environment

Secondly, another aspect of digitalization that changes the nature of recruitment,

training, and talent acquisition is the development of Internet connections. The Internet

now enables people from different geographic locations, nations, and genders to meet in

cyberspace. Hence, it allows employers and employees to widen their searches. Online

talent platforms such as LinkedIn, Freelancer.com, and others are generating enormous

amounts of data, making a perfect match possible between employees and employers;

hence, the company may find an appropriate candidate outside of the city it is in. Also,

such platforms enable businesses to attract workers that are already hired by another

entity. In the past, such information was closed and confidential, but now everyone can

be enticed to another entity if it provides superior benefits.

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Another aspect of the Internet's contribution is the possibility found in new occupations

to have a flexible schedule, such as that of contractors, freelancers, outsourced workers

and the self-employed. All these job types have occurred relatively recently. However,

they have already attracted a wide range of people who do not want to depend on a

traditional schedule and be attached to an office. It provides opportunities to people that

are not able to work in the traditional full-time way, such as mothers, disabled people,

students and, in some countries, women. In addition, the absence of geographical

borders online opens up opportunities for many people from the third world to earn

more money than they can in their own countries.

Besides the attraction of flexible work schedules, continuing innovations have provided

many the possibility to engage people using C2C business platforms. Such platforms

include Uber, Airbnb, Etsy, TaskRabbit, etc. These websites and mobile applications

allow people to display their products or services that are attractive to others. It enables

people to start earning money in a non-traditional way, using their own resources such

as a car, a flat or some handmade products. However, access to a cheaper labor force in

cyberspace, such as freelancers, contractors, C2C platforms and by outsourcing, leads to

a decrease in wages and social protection. So, the Internet and its abilities to match

people and provide flexibility may also negatively impact the domestic labor market

and wage changes.

Gig economy

The traditional employment agreements that involve a scheduled number of working

hours and days of vacation, as well as standard social security benefits, is gradually

disappearing due to the increasing impact of digitalization. Hence, it affects the

economic sector as well. The term that describes this shift in the economy is the ‘gig

economy.' According to the Cambridge dictionary, "gig economy is a way of working

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that is based on people having temporary jobs or doing separate pieces of work, each

paid separately, rather than working for an employer" (Cambridge Dictionary). As

world employment shifts from the occupation-based approach to the project-based

approach that does not require permanent employees, so the need for contractors and

freelancers dramatically increases. This is a potentially destructive trend that is

destroying the traditional view of employment and the obligations of the employer. The

gig economy's approach empowers companies to remove quite a huge number of

responsibilities it has for workers such as social and health protection. Arun

Sundararajan (2015), in the article ‘The ‘gig economy' is coming. What will it mean for

work?', has also emphasized the importance of the workers' protection, citing Hillary

Clinton's speech in which she mentioned: "This on-demand, or so-called gig economy,

is creating new economies and unleashing innovation. But it is also raising hard

questions about workplace protections and what a good job will look like in the future."

From the one side, the ‘gig' approach is building up the modern, 21st century economy;

from the other, it is totally destroying the original, long-established concept of the

workplace and its environment. There will be high liquidity of workers in companies

due to the project-based approach. Tom Vander Ark, CEO of Getting Smart, has

claimed: "Over 70 percent of Americans have used some sort of shared or on-demand

service, whether it's Uber for rides or TaskRabbit for tasks. One-third of American

workers are now engaged in some kind of freelancing, project-based work. By 2020,

about four in 10, or about 91 million, Americans will be engaged in quick "gigs" and

project-based work. We also think an equal number will work on or manage projects for

organizations. Many people will go back and forth between contractor and employee for

periods of time in the project-based and idea economy" (Horne, 2016). The gig

economy will cause significant shifts in the future of education and training. Companies

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will not allocate resources into training due to high employee turnover. Hence, workers

should already have the required essential skills and obtain missing knowledge by

themselves.

The gig economy, however, can create new job positions and positively affect the labor

market due to its task-based approach. It changes the traditional timeline of employees

making it more unstable and risky while at the same time providing more freedom and

flexibility. Arntz, Gregory, and Zierahn (2016) in their comparative analysis for the

OECD have analyzed the study by Frey and Osborne on the risk of computerization and

have provided their view on the issue. Their claim is that even if many jobs are at the

risk from computerization, the task-based approach will create a significant number of

new jobs that will not be attached to one particular occupation. According to Frey and

Osborne, computers and algorithms will replace approximately 47% of the total number

of employed people in U.S during the next few decades (p.7). However, this calculation

is based on the occupation-based approach, while the prediction that the authors

conclude from the task-based theory is more positive. According to the OECD's studies

that also refer to the PIACC database (Programme for the International Assessment of

Adult Competencies), the average percent of jobs that are at risk of automatization is 9

(Arntz et al.,2016, p. 8). People will switch between different projects and tasks;

however, they will still be in the labor force. The main issue in the prediction of the

future of the job sector is the occupation-oriented view; automatization and new

technologies may reduce by an enormous amount the number of occupations; however,

the amount of work will not decrease. Computers cannot replace real people when it

comes to face-to-face communication jobs or some tasks that aim to adjust robots.

Machines do not have imaginations and are not capable of spontaneous ideas; hence,

they cannot substitute humans in many areas. The administrative sector, in which all

15
occupations focus on repetitive tasks that could be done by computer algorithms, is at

the highest risk. The structure of employment will shift to the more flexible task-

oriented approach. However, high-quality specialists that will manage and engineer

innovations, and therefore highly educated people, will be in increasingly high demand.

Arntz, Gregory, and Zierahn (2016) in their report have considered the relationship

between a worker’s level of education and the risk of automatization, concluding that

education and its structure is of huge importance, and as a result the higher the quality

of the worker the lower the risk of automatization (p.19) So, there are a lot of

opportunities that digitalization gives to people - it creates new workplaces where

employees may perform more creatively and demonstrate their knowledge. People will

be able to combine several projects and not be limited to one specific occupation.

Digitalization and the task-based approach is not an issue - it is the new form of the

employment. To fit in, workers and students will have to increase their knowledge and

develop the level of their education. Training and updated information are both essential

for future employment because things are changing so fast on the labor market.

Change from task-oriented to job-oriented approach

Digitalization is shifting the nature of employment. A significant number of occupations

are at risk of automatization. Hence, many people assume it is a negative development;

however, digitalization and the gig economy lead to the development of an economy

and, in fact, provide a boost. Therefore, companies have to change their cultures to

embrace computerization and the task-based approach. Charles-Edouard Bouée (2015),

in his article "Digital Transformation Doesn't Have to Leave Employees Behind", refers

to the study conducted by Roland Berger with the Bundesverband der Deutschen

Industrie (Federation of German Industries, or BDI) that deduced: "If Europe harnessed

digitization, by 2025, the continent could see its manufacturing industry add a gross

16
value of 1.25 trillion Euros. The risks of failing to digitize are equally dramatic: by

missing out on digital transformation, European industries could suffer potential losses

of up to 605 billion Euros in the same period." Hence, people should reject biases

towards the impact of digitalization because it provides a lot of opportunities to create

new jobs and lets many groups of people (mothers, the disabled, etc.) find a suitable

job. Companies will also gain from the ability to attract different intelligent, skilled

workers, and save money due to the reduction in costs that automatization brings.

The changing nature or recruitment, training, and talent acquisition shifts the skills that

are demanded; hence, people should obtain additional knowledge and qualifications to

be able to cope with the new conditions. The market needs are changing incredibly fast,

so it is not enough to have just a college or university education to be able to have a

permanent job. Continual training programs and certifications are of huge importance in

the gig-economy based market today. The almost universal reach of computerization

means that people must be able to work with computers and algorithms. Everything is

transformed from paper to bits and databases. There is a significant number of programs

designed to manage a company's documentation and databases, such as SAP and

Oracle; therefore, employees should be familiar with computer-related skills. These

skills will boost their chances to be hired in the age of digitalization and provide them

with a larger variety of tasks that they can perform.

Digitalization leads to huge changes in the economy, and specifically in the

employment sector. Automatization and robotization are expected to replace a

significant number of occupations. At most risk are medium and low-skilled workers

employed in manufacturing, administrative support and repetitive-type jobs such as

journal or data entry. However, automatization allows companies to save money and

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employees to occupy more satisfying positions, if they improve their skills. The

Internet-based platforms that have come with digitalization are tools that allow people

to find more interesting, well-matched and flexible job. The Internet has already created

new types of occupations for contractors, freelancers, outsourced workers, the self-

employed etc. It enables people who could not work before to do so. All such positions

empower companies to reduce the responsibilities and costs associated with permanent

employees. These shifts have dramatically changed the economy and have created the

new term ‘the gig economy’. The gig economy refers to temporary contract workers and

the task-based approach. However, the gig economy is developing the global economy

today, so companies should adjust their cultures toward it to gain future revenues.

Employees need to develop their computer proficiency and be able to obtain new

knowledge and skills.

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Chapter 3

This chapter focuses on the shift from an office work environment with traditional full-

time or part-time occupations to flexible cyber-based employment that allows

employees to choose the conditions that are more suitable for them. The chapter will

provide in detail a description of the new types of work, such a freelance, self-

employed, or task-oriented, and consider the associated positive and negative aspects

for both employees and employers. Then, new skills will be discussed that are needed in

the age of digitalization, which has created such an array of new jobs. As was reviewed

in chapter one, a vast number of occupations will be replaced and disappear; however,

computerization and the Internet will demand new skills and create new jobs. Therefore,

the balance will be improved - people who now occupy low and mid-level positions

should obtain more proficiency and pass different training programs to stay employed.

Another aspect of digitalization that makes it so valuable is its limitless opportunity to

gather people of all nationalities, genders and abilities to one place to give them a better

choice, and for employers and employees to find a perfect match. There are no

geographical or language boundaries that can narrow the search process thanks to the

capacity of the Internet. This chapter will discuss all these changes and how they reflect

on HR management.

Shifting to more flexible jobs

Digitalization and Internet-based talent platforms have completely changed the

traditional image of the average employee. The schedule that includes an eight-hour

workday, sick leave, holidays, vacations and awards is being gradually replaced by a

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flexible schedule that does not have any structure or boundaries. People work from

anywhere, at any time they want and on any day they can.

The world is changing from a company-oriented to a project-oriented approach,

meaning that independent contractors who do not represent the company or its culture

are replacing the importance of the company to function as a single body with

permanent employees who sit in a traditional office.

Contractors

Companies prefer to hire different self-employed workers whom they do not need to

recruit as full-time employees and provide with several types of insurances. This type of

employee is categorized as self-employed or a contractor. Contractors are not part of

the company - they do tasks as external workers, not as a representative of the entity.

According to the Oxford dictionary, a contractor is “a person or firm that undertakes a

contract to provide materials or labour to perform a service or do a job.” (Oxford Living

Dictionaries).

So, the company is not liable for the protection and social insurance of such workers,

while the self-employed are not obliged to come to an office and follow the rules of the

employer. The contractor gets the task that should be done according to the conditions

in an agreement, and gets a payment for this service; there are no other obligations from

either side. Such cooperation can be viewed from a positive and negative side for both

employers and workers. For the company, it is beneficial to hire different people to

perform a random task, and to not carry any responsibilities or obligations such as

health insurance, social protection, pensions, or additional benefits. However, from the

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other perspective, the company may lose its culture and strength due to a lack of

traditional workers who, in many cases, build up the foundation of prosperous firms.

Freelancers

A freelancer is another form of self-employed worker who is quite similar to a

contractor, but who can be characterized as having a less formal relationship. According

to the Oxford dictionary, a freelancer is “self-employed and hired to work for different

companies on particular assignments” (Oxford Living Dictionaries). Journalists, for

instance, in many cases are freelancers. Several magazines and newspapers can hire one

such person at the same time. However, they are independent and are considered

supernumerary employees.

Because of the increasing growth of online talent platforms, a tremendous number of

people (even if they have a permanent job) work as freelancers to obtain additional

profits. Platforms such as Freelancer, TaskRabbit, and Amazon Services, etc., enable

people to earn some extra money, or to turn a certain job into a full-time occupation. As

a contractor for a firm, a freelancer does not have any limits on the number of daily

working hours, expected presence in an office or other such responsibilities. The work

is only task-oriented. Hence, a freelancer has an entirely flexible schedule.

As with a contractor, a freelancer enjoys a type of employment that also has positive

and negative aspects. Freelancing allows people to obtain several tasks from different

employees at the same time, and depending on the complexity of the task a person can

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negotiate the remuneration - only the deadline and some requirements (guidelines) need

be followed, otherwise the freelancer has absolute flexibility and freedom of choice

regarding when and where to work. One of the main issues that people have in their

standard workplace is misunderstandings with colleagues or supervisors; hence, moving

to a freelance type of employment will be a possible solution for many who seek to

escape such stress. According to the Citi GPS report, “In Britain, the number of people

in self-employment has increased by more than 30% since 2000, with the result that one

in seven is self-employed. In America, the rise of self-employment has been even more

substantial, growing by nearly 50% over the same period” (Frey, C. B., & Osborne, M.

2015,p.65).

For employers, this system saves money, reduces responsibilities, and enables them to

attract different kinds of specialists without having to hire them. However, there is a

risk that freelancers will be underpaid due to the enormous competitiveness of the

employment market. Employers seek freelancers who can complete a task at a cost that

is lower than a standard worker demands; hence, companies will bias towards the

cheaper worker. To get a job, many freelancers lower the cost of their labor, and as a

result, the overall fee for freelance jobs may decrease. That will not only impact the

wages of freelancers, but also standard workers.

Outsourcing

When considering the newly created job title ‘freelancer,' it is important to mention

other types of jobs that flow out of it: outsourcing and crowdsourcing. According to the

Cambridge dictionary, outsourcing is “a situation in which a company employs another

22
organization to do some of its work, rather than using its own employees to do it”

(Cambridge Dictionary). Usually, companies outsource their work to another country

with relatively cheap labor costs, such as India. “Digital technologies such as cloud

technology, together with standardization and automatization, make it easier to

outsource tasks, not only to more specialized locations or workers but also to emerging

countries with lower labor costs (Valsamis et al., 2015, p.21).

The main reason companies use outsourcing is to reduce the expense of its employees.

It is more beneficial for the employer to outsource half of the work that does not

demand any specific knowledge of the company’s operations to a third party that can do

it relatively cheaply. Usually, work that is not related to critical thinking and generating

new solutions is directed to the other company or people to complete. Hence, businesses

and the country where the work is outsourced both benefit, while the domestic labor

market experiences damage.

Crowdsourcing

The term ‘crowdsourcing’ is a branch of the term outsourcing. Freelancers, volunteers

or just random people that want to earn some money, participate and cooperate, in some

cases even to find a solution to a particular issue (it may be related to a product or web

platform), or finish some task (Technopedia). The idea of crowdsourcing is that it

allows quite a wide range of data from different specialists or customers to be collected.

Hence, this collecting of information from different sides promotes better results.

However, there are also some issues that may occur, such as an overloaded of data that

will need additional sources to normalize, and the cost of labor will decrease due to the

huge number of participants.

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New skills that create new job titles

Without doubt, new types of employment enable people to have more flexible

schedules, to have more freedom in their career choices and to be mobile thanks to the

Internet. Digitalization creates new jobs that demand new skills from employees.

Because a significant amount of employment has been transferred to cyberspace, the

first and primary skill requirement knows how to use computers and the Internet. The

paper “Exploring the Digital Nation” (Strickling, L. E., & Doms, M., 2013) analyses

Internet usage among diverse groups of people and explores its impact on society with

regard to employment, health and communication. The paper claims that the increasing

adoption of the Internet will positively impact both employment, by boosting it in the

health sector, and society, through communication (p.5). People that know how to use

the Internet and new technologies are most likely to find better offers on the labor

market. Also, the fast-changing nature of employment in the digital age requires

workers to boost their qualification and knowledge through a different kind of training -

most of which involves online courses. Hence, to be able to obtain work and get new

skills, people must have the basic capacity to use computers and the Internet.

E-skills

Other crucial skills that are essential to obtain are ‘E-skills’. According to the Eurostat

Glossary, “E-skills, or electronic skills, include those needed to make use of

Information and Communication Technologies (ICT), as well as those required to apply

and develop them.” E-skills are divided into three categories: ICT practitioner skills,

ICT user skills, and E-Business skills. (“Glossary: E-skills “, 2016).

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• “ICT practitioner skills are the capabilities required for researching, developing,

designing, strategic planning, managing, producing, consulting, marketing, selling,

integrating, installing, administering, maintaining, supporting and servicing ICT

systems.”

• “ICT user skills are the capabilities required for the effective application of ICT

systems and devices by the individual. ICT users apply systems as tools in support of

their own work. User skills cover the use of common software tools and of specialised

tools supporting business functions within industry. At the general level, they cover

"digital literacy".”

• “E-Business skills correspond to the capabilities needed to exploit opportunities

provided by ICT, notably the internet; to ensure more efficient and effective

performance of different types of organisations; to explore possibilities for new ways of

conducting business/administrative and organisational processes; and/or to establish

new businesses.” (“Glossary: E-skills”, 2016).

So, it is not enough to know how to use modern technologies - it is important to be able

to apply them to analysis, administration, planning, etc. Digitalization will demand E-

skills of employees so they can perform tasks; therefore, it is crucial to have such skills

in order to stay employed. Otherwise, there is the huge danger that a worker shifts to

low-skilled positions or is totally unemployable. Hence, people must educate

themselves either through different programs and training or by the learning-by-doing

method. According to the Eurostat data for the EU-28, approximately 56% of people

have obtained E-skills by the learning-by-doing method, and 51% with the help of their

25
friends, colleagues, etc. At the same time only 28% of individuals have preferred to

acquire E-skills through different education providers such as schools, universities, etc.

(Valsamis et al., 2015, p.40). From this information, it may be concluded that most

people do not fully realize the significance of obtaining E-skills, hence, they prefer self-

learning instead of participating in formal education and professional training.

However, the picture will change with the growth of digitalization’s impact on the

employment sector.

New generic skills

Another change that digitalization has brought to work-skills requirements is the need

for new generic skills. According to a study conducted in 2011 by the Institute for the

Future (IFTF), the following important generic skills may need by a person to be

successful in the digitalized workplace (Valsamis et al., 2015, p.39):

• “Sense Making: The ability to determine the deeper meaning or significance of what is

being expressed. Critical thinking is one of the skills that machines do not have.”

• “Social Intelligence: The ability to connect to others in a deep and direct way, to

collaborate with others and to process information quickly and respond appropriately.“

• “Computational Thinking: The ability to translate vast amounts of data into abstract

concepts and to understand data-based reasoning.”

• “New-Media Literacy: The ability to critically assess and develop content that uses

new media forms, and to leverage these media for persuasive communication.”

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• “Cognitive Load Management: The ability to discriminate and filter information for

importance, and to understand how to maximize cognitive functioning using a variety of

tools and techniques.”

• “Virtual Collaboration: The ability to work proactively, drive engagement, and

demonstrate presence as a member of a virtual team.”

So, to be successful and in-demand employees in the digitalized workplace, individuals

have to acquire both E-skills (that include ICT practitioner, ICT user, and E-Business

skills) and new generic skills (such as Sense-Making, Social Intelligence, and Virtual

Collaboration). In other words, employees must be more intelligent than computers to

perform tasks that are impossible for machines to complete.

Digitalization has no limitations regarding geography, demography, and gender

New types of jobs that it creates, such as outsourcing, crowdsourcing, freelance, etc. do

not demand a place of work in a particular location; the workplace transfers from a

physical space to cyberspace. There is no cultural peculiarity regarding gender; in many

countries there is a predominance of male workers (women may be restricted in their

work, or their labor may be underestimated and underpaid). This absence of limitations

enables people to reach markets that had been closed for them previously. Thanks to

digitalization and its impact on the increase of self-employment, individuals may work

outside their geographical boundaries. According to the report “The Digital

Transformation of People Management” by Oxford Economics, “Greater collaboration

across geographic regions is seen as the biggest benefit of cloud computing” (Oxford

Economics, 2012, p. 9). Great examples are online platforms such as eBay, Etsy, etc.

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Etsy, for instance, allows self-employed individuals (sellers that can open their online

shops offering their crafts on the website) to access a significant number of customers

from different countries for an incredibly low price. According to the Citi GPS report

“digital technologies have made self-employment an option for a growing share of

workers” (Frey, C. et al., 2015, p. 65). Also, new technologies enable an E-business to

prosper due to the relatively low investment and operating costs involved. Only a

limited amount of assets is needed: no additional spending on building rental and a

minimum responsibility to arrange employee insurances (meaning that it is possible to

recruit contractors, the self-employed and freelancers, and outsource many tasks so as to

escape the liability of hiring employees, and avoid paying additional tax and social and

health insurances for them).

Potential risks for the health of the new types of employee

Besides all the possible benefits that digitalization provides to employees, there are

some negative aspects. The new approach to the work environment and the way

employees may have a flexible schedule is attractive to many individuals; however,

there are several risks that these types of employment may cause people.

Firstly, it seems more beneficial for the hired side (contractors, freelancers, etc.) to have

absolute freedom of choice over the place and time of work; however, they have to meet

deadlines that are set by the employers, otherwise they will not get an appropriate

payment. Such workers are not paid regular salaries and are obliged to complete one or

several specific tasks by an agreed date in order to receive payment - the employer is

not required to pay fixed salaries, wages, insurances or provide office space with other

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facilities; hence, it could be concluded that the new types of employment are more

beneficial for the companies rather than the workers. Nevertheless, such employees

have to spend extra time to comply with the agreed deadlines, so may be more stressed

and anxious.

Another concern that may occur is a lack of the personal time and space. People that

work in an office according to a regular schedule tend to perceive time out of the office

as non-work time. So, they can turn off their mobiles and be offline, spending time with

their family or friends. New types of employees, on the contrary, are always reachable

through the Internet. They cannot switch their mobile devices off because their job is on

the devices. Hence, these individuals become more detached from their families, and

they almost have no time free of online connection. There is a blurred border between

their personal life and work.

As a result, there is a huge risk for these employees that they become overstressed,

overwhelmed and psychologically unstable. The issue of sleep disorder may also occur

because of the unregulated work hours, and the inability of many individuals to manage

their time.

The new structures of employment may change the conditions and work environment

for people, making them more flexible in terms of time, location and some tasks they

can perform. These workers can simultaneously complete several tasks and may work

anywhere at any time. They can switch tasks, occupations, and locations. However, they

miss the opportunity to be part of a company’s culture, to get a stable salary, and to

29
receive social protection and health insurance. They can be mobile, but this mobility

also means that they are obliged to be online 24/7, again possibly causing mental issues

and an inability to properly manage their time. Also, the new approach to talent

acquisition demands new skills from people. They have to be extremely familiar with

the Internet and obtain both E-skills and generic skills. As a result, digitalization obliges

employees to learn more skills and attend different training courses to be able to be

recruited. Digitalization does indeed provide benefits for employees; however, the gain

to employers is higher. Workers become more responsible for themselves while

companies reduce their liabilities and overheads.

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Chapter 4

This chapter focuses on shifts in employment, recruitment and talent acquisition

regarding the policies and regulations that should be adjusted. As has been mentioned in

the previous chapters, digitalization has changed the nature of HR management by

reducing the number of occupations and creating new types. Such new jobs contain

other requirements and treatments from the employers. Hence, standard policies and

regulations have to be reconsidered and adjusted. The rules and regulations that exist

now are focused on regular full or part-time employment; however, there are no

regulations for contractors, freelancers, or self-employed workers. Such people are at

risk of mistreatment from the side of their employers regarding low wages, lack of

social protection and medical insurance. As has been discussed in chapter three, new

forms of digital employment put aside liabilities from the hiring side.

Hence, many employers may take advantage of this fact and unfairly treat the workers

they hire. Therefore, the government should take control of the defining of the new

types of jobs and consider associated characteristics, so as to subsequently adjust

existing policies or implement new ones. The responsibilities of the employers and

employees have to be determined by the appropriate legislative bodies to allow new

groups of workers to be treated the same way as traditional employees.

Adjustments to the new types of employment

The shift that digitalization has brought to work has changed its nature, and as a result,

the way companies treat their new employees, such as contractors, freelancers, etc., has

significantly changed. The companies are empowered to reduce their liabilities towards

such employees due to a lack of policies and regulations from the government’s side.

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To obtain the same rights as regular full and part-time employees, the self-employed,

freelancers, etc. should receive recognition and thus written rights from the appropriate

government entities. The new types of employment have to be distinguished to enable

those people described to acquire the same treatments as traditional workers do

regarding fair pay and social and medical protection.

According to Kathleen Walker Shaw (2016), the rapporteur of the European Economic

and Social Committee, “Some new forms of employment have been driven by a desire

to avoid the costs and obligations of more standard forms of employment. There is a

risk that without effective rights and protections, monitoring and enforcement, many

new forms of employment relationship will result in a race to the bottom of pay and

conditions, and fuel widening income inequalities, thus reducing disposable income and

suppressing demand and potential for economic growth across the EU and lead to

further long-term macro-economic challenges. The ability of such workers to determine

their levels of pay and conditions through collective agreements is vital to maintaining a

living wage”.

A prime example is the issue that has arisen with the modern platform Uber. It once

again reminds us that appropriate regulations on determining new types of employment

have to be considered. The question that has occurred in court is whether Uber drivers

are Uber’s employees (meaning the company is entirely responsible for their health

insurance or taxation and for potential risks that they can be exposed to, such as

collision with another car) or independent contractors? It is not beneficial for the

company to consider the drivers as its employees because it means that Uber is liable

32
for everything and will lose money. However, the company binds its workers with so

many limitations that are not common when the person is an independent contractor.

Uber, it can be argued, treats its drivers as its employees and demands appropriate

response while escaping associated liabilities by announcing such people as

independent employees. Alan Hyde (2015), Professor of Law and Sidney Reitman

Scholar, in his article “Uber drivers stuck in legal limbo as US labor laws fail to keep

up” cites the Supreme Court’s note: “the line between employee and independent

contractor “can be manipulated largely at the will of” the employer”.

Hence, unfair employers may easily violate the rights of contractors while there is no

legal framework that can legitimately deal with such issues. Therefore, new types of

employment have to be covered by the same rights as are traditional types, through

appropriate policies and regulations that will oblige employers to provide them with the

same conditions as the average standard workers receive.

Social, health and safety protection under digitalization

Traditional contracts and bargains are not suitable for new types of employees

(freelancers, contractors, self-employed, etc.) because there are no limitations on

working hours and the workplace. Also, as already discussed, those people are hired to

complete specific tasks, and they are not considered part of the permanent collective.

Hence, they are at high risk of mistreatment by employers regarding remuneration,

social protection, and health insurance:

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Wage discrimination: due to the quite high competition among freelancers, contractors,

outsource workers, etc., an employer can decrease the payment to a minimum and still

find a person who will agree to complete the task for such a low amount. A great

example that illustrates this point is the online platform Freelancer. It works as follows:

an employer places a task, the deadline, and the payment range (for instance 30$-50$);

freelancers then bid on the task and usually try to put a low price to have more chance

of winning - as a result, the employer can choose the workers that can do the task for

the lowest price.

No regulation can prevent employers from discriminating according to wages in such a

way, and determine such limits on appropriate payments. Hence, this trend may

decrease not only the payment for the new types of employees, but also reduce the

overall cost of labor in the world, because companies would prefer to outsource a

significant amount of their work to the cheaper labor force.

Social protection: the main feature that attracts many people to switch to freelancing

and self-employment is the flexibility available in terms of time and location. There is

no need to wake up early in the morning and go to an office that may be located far

from home, and people do not have to then spend hours in the workplace. The new

types of job allow individuals to work from anywhere and at any time that they prefer.

It is indeed convenient because there is an enormous number of people that are not able

to concentrate in the morning, while the peak of their activity starts in the evening.

Thus, such people prefer to leave their tasks until the night. Others cannot complete a

task in one sitting, so they do parts during the whole day, keeping their laptop or other

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electronic devices with them. Today, many coffee shops and small cafes have turned

into offices for many of the self-employed. Freelancing enables individuals to make a

schedule that is more suitable for and attractive to them.

However, such non-traditional workers can be at risk from always engaging with their

work, because there are no limitations on their work hours as exist in traditional forms

of employment. So, because freelancers, the self-employed, etc., work from anywhere

at any time; they do not have boundaries between their job and free time. This could

negatively affect their social life, their family relationships and even their health. The

authors of the study “Employment and Skills Aspect of the Digital Single Market

Strategy” assume that the flexibility that new types of employment provide may also be

considered negative because “increased work intensification and the obligation for

workers to always be available may cause stress and burn-out. Moreover, there are also

concerns about access to social protection for workers under these flexible work

arrangements.” (Valsamis et al., 2015,p. 57).

Also, as a freelancer or contractor, a person does not have any protection from the law

in terms of dismissal, an approach that is in contrast to the traditional one in which a

company has to give an employee one or two months to find a new job (meaning the

worker is warned that he or she will be fired after the stipulated period). A company

may fire non-traditional employees at any time it considers that the quality of their work

is unsatisfactory or that their services are no longer needed. As a result, there will be no

social protection from the government because there are no policies covering the

dismissal of workers in new types of employment.

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A pension is another type of social protection that is at risk of disappearing for new

kinds of employees, again due to the lack of regulations and policies.

Health insurance: another aspect, besides social protection, that is typical for

traditional jobs is health insurance, which is usually provided to employees (especially

for people such as builders, who are engaged in work that involves a higher risk of

injury) by employers (companies and corporations). However, individuals that work in

the new types of employment are not able to obtain the same rights as traditionally hired

employees and cannot get the medical protection from the company paying them.

Because these individuals are not employees of an enterprise in the traditional sense,

they are not able to get the same treatment, because the enterprise is not liable for them

as it is for its own workers.

Hence, it is not obligatory to provide them with medical insurance and other social

benefits. The huge majority of employees that shift from a traditional approach to the

new digitalized one suffer from mistreatment by companies - a lack of health insurance

is one example. Even if an individual is not a part of a company, there still have to be

policies and regulations that will ensure he or she has the same rights and receives the

same treatment as traditional workers have.

36
Taxation policies

Another key issue that arises from the digitalization of the workplace and its impact on

policies and regulations is the adjustment of tax requirements. There are many types of

taxes that companies have to pay to operate legally - one is employee tax. However,

new kinds of employment (freelance, self-employment, outsourcing, etc.) are all non-

permanent, and, as discussed earlier, the company is not liable for such workers’

insurances and taxation. Many freelancers work without any contract or sell their craft

on the Internet without specific permission (such as on Instagram pages where

individuals sell different products that they have made or bought). Outsourcing is also

linked with jobs done through the Internet by people from other countries.

In the case of the self-employed and contractors, they are usually liable to pay taxes for

themselves as individual entrepreneurs; however, it is quite hard to track their profits,

and tax them appropriately. For the outsourced labor force, the issue is even more

complicated because such workers may be from other countries and may complete tasks

through the Internet; hence, a taxation process is involved.

Another similar issue involves online platforms, such as Uber, that allow customers to

provide services to other customers. Uber operates in many countries, but it hides its

profits in offshore, tax-friendly countries, and the countries in which the company

makes money, and replaces traditional taxi service firms that pay taxes to those

particular countries, suffer. For instance, in the year 2014 in the UK, Uber paid £22,134

in corporate tax while its profit was £866,000 (“Uber pays £22,000 tax on £866,000 UK

profit”, 2015). The company generates huge profits; however, due to digitalization,

there is no need for it to have branches in every country it operates in, because it runs its

37
business through the Internet. Therefore, Uber can officially move its headquarter to the

state with the lowest taxes and avoid paying huge amounts of money.

Both states and workers may be harmed by the unregulated actions of such platforms as

Uber. Hence, the question that arises is who is liable for the payment of taxes - the

company or the temporary employees? And to which state do those taxes have to be

paid? The issue of jurisdiction is the crucial part of the taxation agenda because, as

stated in the EU Policy Department’s report ‘ Tax Challenges in the Digital Economy,'

“Traditionally, companies have a physical presence or a nexus in a given jurisdiction,

where they are obliged to pay their taxes. E-commerce eliminates the need for a

physical presence or nexus of a company in order to have access to its customers there.”

(Eli Hadzhieva, 2016, p.17).

Hence, the digitalized economy empowers businesses that run E-commerce to avoid tax

payments in the countries they operate in, due to a lack of jurisdiction. The government

has to regulate and adjust its legislations to prevent such platforms - that are not

physically present in each country they operate in - from inappropriate conduct towards

taxation policies. Also, the digitalized economy’s products, such as intellectual property

or patents, are intangible. Hence, it is complicated to determine their real value, and

calculate appropriate taxation (Eli Hadzhieva, p.17).

All such issues with taxation in the digitalized economy may negatively affect both

employees and states because online platforms that provide services may escape paying

tax in the country they operate in, while at the same time they can offer cheaper services

38
that replace traditional companies on the local market and people may lose their jobs.

To prevent these issues, the government must create regulations of taxation on E-

commerce businesses, and individuals that prefer new types of employment, such as

freelancers.

The authors of the paper “Digitalisation for equality, participation and cooperation in

industry” represented by the IndustriAll European Trade Union, also observe this issue

and bring several recommendations of rules to prevent such practices (IndustriAll

Europe Position Paper, 2015, Digitalisation of Industry, p.3-4):

• “The labour law and collective agreements applicable to a given employee must be

that of his/her physical place of effective work, i.e. also his/her home if s/he works

remotely from there”

• “The tax regime applicable to the company's profits should be determined according

to the Member States where its employees physically work.”

• “Applying the principles of a mandatory Common Consolidated Corporate Tax Base

to all firms having employees that physically work in more than one Member State of

the EU.”

So, to prevent unfair practices involving tax avoidance, the report suggests focusing on

the countries in which an employee has a physical presence, rather than the settled

headquarters of the companies. This approach will lead to the stabilization of tax

collection from firms that operate within several territories, increasing transparency and

fairness.

39
Rights of employees and employer responsibilities

To keep the labor market safe in the digital economy, the rights of employees and the

liabilities of companies have to be determined. Joseph G. Davis (2015), Professor of

Information Systems and Services, The University of Sydney, in his article “Protecting

the rights of the digital workforce in the ‘gig’ economy,” claims that “basic issues such

as classifying a worker as an employee or independent contractor; workers’ rights to

bargain collectively for a decent minimum wage and conditions; and the need for

balanced service-level agreements, must all be dealt with fairly.” New types of

employees such as freelancers, contractors, etc., have to be distinguished in order to

adjust existing rights or generate new ones. Otherwise, those individuals lack legislative

protection and may suffer illegitimate treatment from the hiring side. Also, the rights

and duties of a company towards these new types of employees and its taxation

responsibilities have to be determined. Companies should have responsibility for the

individuals they are hiring, even if those people are external workers. The government

has to determine the legal obligations of employers to prevent unfair treatment of their

external employees, such as freelancers, independent contractors, etc.

Digitalization may be perceived negatively due to its unfair treatment of new types of

employees and the companies’ relations with governments. Because of a lack of

legislations and policies towards E-commerce businesses, those companies now gain

from the new Internet approaches. They can cut their costs and reduce responsibilities to

their employees (such as contractors, freelancers, etc.) and to the governments of the

countries they operate in. To protect workers from unethical treatment, the existing

regulations and policies have to be adjusted or transformed. Otherwise, many new types

of employee will be at risk of underpayment and will lack social protections.

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Chapter 5

The previous chapters focused on the influence of digitalization on employees by

discussing the potential opportunities and threats that they may experience. As has been

mentioned, the changing nature of employment has dramatically affected the conditions

experienced by employees. However, employers are also affected by these changes and

have experienced some shifts as well.

This chapter’s aim is to look at digitalization and its effect on the work environment

from the employer’s point of view.

It focuses on both the challenges and potential gains. The main challenge that is

analyzed in the chapter is the unstable relationship between employee and employer,

possibly decreasing productivity and worker output. For the purpose of better

understanding, we will look at the concept of the “psychological contract”.

The huge advantage of digitalization for employers is the Internet’s capacity to provide

enormous resources of potential candidates via online talent platforms.

This chapter describes new methods of recruitment and training through online talent

platforms. Mainly it discusses the impact on productivity, quality, and fit of the

employees for employers. Online talent platforms provide almost unlimited access to

different labor markets that enables employers to widen their choice and find the best

candidates to fit their requirements. Digitalization has empowered innovations such as

making online platforms the leading tools in recruitment and talent acquisition. The era

of printed resumes and advertisements in job columns of newspapers has been entirely

41
replaced by the new digitalized approach that uses the Internet as the primary tool for

the search for talent.

Also, those platforms allow skills to be defined that are urgently needed on the market,

and provide people with this information. These skills may be predetermined by online

talent platforms by analyzing the significant amount of data that goes through them

(meaning that employers try to find people with essential skills by posting details of

positions on online platforms or using keywords in outreach. Hence, the system may

analyze this data and conclude what training people must complete to be competitive in

the labor market). This feature of digitalization is also beneficial for employers because

they do not want to spend resources on training and educating employees who may not

stay in the company for a long time. Instead, they create the need for specific skills and

expect potential candidates to get those skills (by spending their own money).

However, some platforms have damaging effects on employers. Such platforms are

service providers, including the well-known companies Uber, Amazon Services, etc.

Their growth has caused many companies to experience huge losses because they are

not able to compete with platforms that have such marked price advantages and that are

more convenient for customers to use. They also embrace the new types of employees,

such as freelancers, because many platforms offer temporary jobs to them.

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Challenges for employers: the “psychological contract”

Without doubt, the changing nature of employment has affected both employees and

employers. In the previous chapters we discussed its effect on workers, both potential

opportunities and threats. Now, it is time to discuss what challenges the employer has to

overcome and what effect they will have. A good relationship between an employer and

his/her workers is a crucial part of the success of any company. As long as employees

are dedicated to their work, they are able to boost the company’s output and, as a result,

profit. However, no one will spend his or her time and energy without expecting good

rewards in terms of payment and the promise of a long-term relationship with the

company.

This type of relationship between the employer and employee is called a

“psychological contract”. Coyle-Shapiro, Jacqueline and Parzefall (2008), in their

research paper “The Psychological Contract” cite Rousseau’s definition of it as “an

individual’s beliefs concerning the mutual obligations that exist been him/herself and

the employer” (p.8).

So, there is an intangible and unwritten agreement between the employee and employer

that supposes that there is a set of mutual obligations that have to be fulfilled to satisfy

both parties. In other words, the employee wants to receive a guarantee that he or she

will get appropriate reward and will stay at the company for a long-time, while the

employer needs workers to be dedicated to their jobs and do their best for the success of

the entity. The psychological contract, and its fulfillment by both sides, makes the

relationship between employees and employers stronger.

However, the issue that arises with digitalization and new types of employment is the

increasing distance between companies and workers. The shifts in the work

43
environment have led to a constantly widening gap in the relationship between

employees and employers. Since there are fewer and fewer companies in which workers

can stay for several decades, workers’ trust and dedication to the entity decreases. It

tends to be that an employee changes jobs and locations more frequently than 10-15

years ago. The new digitalized environment encourages companies to neglect their

workers in preference of profits.

As a result, the psychological contract between the parties is weak due to the lack of

confidence in the long-lasting nature of the relationship. Knowing that he/she may be

replaced by a machine or fired because of cuts in the workforce, an employee will not

fulfill all his/her obligations of the psychological contract towards the company – the

lack of trust and loyalty to the employer takes over. This issue may dramatically affect

the output and productivity of workers, and, as a result, affect an employer’s status in

the eyes of its employees.

Online talent platforms: types and aims

Online talent platforms that started to appear less than two decades ago, and which have

already significantly changed the nature of recruitment and employee acquisition, are

one of the primary tools offered by digitalization. They empower both traditional

workers and new-type employees to find work. These platforms allow people from

different countries with random skills to find a better fit with potential employers. Many

of these platforms are already of enormous importance in the labor market. For

example, LinkedIn is “the world's largest professional network with more than 433

million members in 200 countries and territories around the globe” (LinkedIn). To

44
generate such an enormous number of profiles from people across the globe, in one

place, would be almost impossible without digitalization and the advent of the Internet.

A McKinsey report called “A labor market that works: Connecting talent with

opportunity in the digital age” (Manyika, J., Lund, S., Robinson, K., Valentino, J., &

Dobbs, R., 2015,p.31), divided other such platforms into three categories, according to

their aims and goals, as follows:

The first group is the online talent platforms that aim to match individuals with

traditional jobs (standard approach) such as LinkedIn, Monster, Glassdoor, Xing,

Careerbuilder, etc.

The second group of online talent platforms is focused on matching services and

workers with each other (contingent) such as Uber, Etsy, TaskRabbit, Amazon Home

Services, Upwork, etc.

The third and last group is aimed at discovering talents, and the most popular platforms

are Good.co, PayScale, and ReviewSnap.

Because of digitalization, LinkedIn, Monster, Glassdoor, Xing and Careerbuilder, the

recruiting platforms that aim to match employees with the employers, have an almost

unlimited capability to generate an enormous amount of data on workers and companies

45
and find better fits for both. The LinkedIn network, for instance, has more than 433

million members and according to a McKinsey report “facilitated nearly one million

new hires in 2014” (Manyika, J., et al., 2015,p.4). The Monster platform receives 29

resumes every minute, while during the same minute 7900 jobs are searched, and 2800

jobs are viewed (“Monster”, 2016). The online talent platform Glassdoor provides

potential employees with full information about companies and the conditions within

them: “Glassdoor holds a growing database of millions of company reviews, CEO

approval ratings, salary reports, interview reviews and questions, benefits reviews,

office photos and more. Unlike other jobs sites, all of this information is entirely shared

by those who know a company best — the employees.” (“Glassdoor”, 2008-2016).

Thanks to these platforms, a company that wants to hire a candidate who meets all its

requirements, and a worker seeking to find the best workplace conditions, both benefit.

The crucial advantage of those networks is that the information about the companies is

open, as is access to the employees, even if currently employed in another firm, as they

still have their profile on LinkedIn where they keep all relevant information (as an

online resume). So, if a company decides to hire someone with particular skills, it can

‘steal’ the worker from its competitor. Before digitalization, all profiles were closed,

and it was complicated to find information about workers that were already employed.

However, online talent platforms have dramatically changed this. Therefore, this

transparency somehow makes companies provide better conditions for their employees

and treat them better to keep them. The platforms generate an enormous amount of data,

so they can provide a better match, and as a result, more people will be recruited and

satisfied with their jobs.

46
Better and more qualified matches of companies and employees

Digitalization also connects people that want to provide services with those who want

them, and online platforms such as Uber, Etsy, TaskRabbit, Amazon Home Services,

and Upwork are designed to be mediators. These platforms create a marketplace in

which individuals may promote themselves and their skills to a wide range of potential

customers. For instance, Etsy is an online network that enables sellers of handmade

craft to create a shop inside the website and sell their creations to people from different

countries and territories. The seller pays a fee for each item listed in the shop, and pays

a percentage commission of each sale; however, it is still quite a low price compared to

the amount some would need to pay to open a real store and put their handiwork there

(“Etsy”, 2016).

Uber is another platform that enables people that have a car to earn some extra money

by working as a taxi driver, and for customers to get a cheaper ride. TaskRabbit and

Amazon Services allow customers to find individuals that offer to do repair jobs around

the home. Upwork creates an online workplace for freelancers all over the world. All

together, these platforms create value for freelancers by empowering them to deliver

their services to a wide range of customers. Those consumers may also be small

companies (start-ups) that are not financially able to hire all workers on a full-time

basis. So, they can hire them as contractors, or freelancers to complete temporary tasks

via these platforms.

For instance the Upwork online talent network “has created online marketplaces

connecting some four million businesses with more than nine million freelancers from

47
180 countries, performing tasks such as web development, graphic design, and

marketing” (Manyika, J., et al., 2015,p. 5).

However, there are potential downsides as well because the traditional companies that

were previously performing such tasks or services may face issues. For instance, Uber’s

online platform is already causing many problems for traditional taxi services. The

network is even banned in many countries/cities, such as Germany, Barcelona and

South Korea, and some states in the US. (Khosla, E. G., 2015). There are several

reasons for this. One of them is that Uber drivers do not need to have an exclusive

license like the one regular taxi drivers are required to obtain (a procedure for Uber

drivers does exist, but it is much easier), hence, this absence of regulations makes it less

safe and illegal in many countries. Another issue that Uber’s activities has raised is the

competitive standards of taxi services, which have dramatically decreased due to Uber’s

quite cheap tariffs. Hence, many taxi companies lose profits and a significant number of

clients.

It could be concluded that digitalization creates excellent conditions for the

development of freelancers, while traditional companies that previously provided those

services are suffering because they cannot provide the same facilities at such low prices

without experiencing losses. So, many people that are employed in traditional

companies may be dismissed, because it will not be profitable for many such businesses

to continue to operate.

48
Doubtless, digitalization and its impact on employment methods through online talent

platforms has changed the nature of recruitment and talent acquisition. The McKinsey

prediction model estimates that those platforms may “raise global employment by 72

million full-time-equivalent positions (or 2.4 percent) by 2025.” Also, this model

predicted that many people will work extra even if they have a permanent job; the

report claims that some 200 million will add some extra hours and that they will work

through the contingent online platforms (Manyika, J., et al., 2015,p.9). So, online

platforms may encourage individuals to work more and give them the opportunity to

find more possibilities, and as a result, the overall number of employed will increase.

The great opportunity that online talent platforms give to both employees and

employers is that they provide a better match up between them. It is quite common that

a company cannot find appropriate candidates for positions; likewise, individuals with

high levels of proficiency are not able to find a position or company that will provide

appropriate conditions. According to a recent survey conducted by LinkedIn,

approximately 37 percent of employees are not satisfied with the positions that they

occupy and the way the company they work for treats their skills (Manyika, J., et al.,

2015,p .17). Also, the dissatisfaction of workers is caused by low wages compared to

workers’ levels of education and proficiency. “In the United States, for example, more

than one-quarter of workers holding bachelor’s or advanced degrees earn less than the

median annual wage for two-year associate degree holders” (Manyika, J., et al.,

2015,p.24). This issue may be resolved by online platforms because they provide a

wider range of choice due to the absence of geographical borders and the capacity to

access information about a company regarding payment and conditions.

49
The same issue is rising among employers; many admit that it is difficult to find a

candidate that will fit their criteria. “Thirty-six percent of the 37,000 global employers

surveyed by Manpower stated that they could not find the talent they needed, in 2014.”

(Manyika, J., et al., 2015,p.18-19). So, online talent platforms enable employers to

widen their search by posting their job offers on those networks that generate enormous

amounts of data about potential employees. Also, they can search outside the borders of

their city or country. The same is true for workers that have the opportunity to seek job

offers in other towns and territories.

So, online talent platforms are great tools to match employees and employers together,

and both can benefit from this. However, there is the possibility that the cost of

employment will reduce since a company may find the proper fit in countries with

lower average wages than in its country of operation. Such platforms also allow

outsourcing of jobs, giving freelancers greater opportunities. Both outsourcing

(including crowdsourcing) and freelance platforms encourage the decline of wages (as

discussed in chapter two). The growth of the usage of these platforms may also decrease

the overall cost of labor.

Reduction of the cost of employment

Another crucial feature of online talent platforms is a reduction in the cost of

recruitment and talent acquisition. Giam Swingers (2012), CEO of Deloitte Australia,

claims that the use of social media networks such as LinkedIn, Facebook, and Twitter in

recruiting new employees “has increased the ability of companies to promote their

50
employment propositions and find quality people.” For Deloitte it has also reduced the

cost compared to conventional recruitment techniques by 80 percent.

When considering the traditional method of recruitment that existed before

digitalization, it could be concluded that online talent networks have significantly

changed the nature of how employment is offered. The offline way that companies

recruited workers was through advertisements in newspapers and specialized HR

departments. The information about employees was quite confidential and it was a

complicated and lengthy process to create portfolios. The whole process was long and

expensive. Online talent platforms now make the process more efficient, more

accessible and less costly. Companies do not have to spend huge amounts on HR

departments or external recruiting firms. Online talent platforms allow access to the full

range of potential employees; hence, there is no need for costly advertisements and

other campaigns to attract workers. Moreover, before these new networks existed, the

range of choice was quite small - to obtain a desired employee from another country

was complicated and involved many mediators, such as recruitment agents. The

recruitment and talent acquisition process before digitalization was quite expensive and

demanding. All the information on workers and their conditions was confidential.

Hence, companies were not able to get access to this data from another company, just as

employees were not able to widen their search for a better job.

Cecilia Chen and Marcus Haymon (2016), authors of “Realizing the potential of digital

job-seeking platforms”, claim that offline methods of recruitment via newspaper

advertisements, recruitment agencies, etc., are inefficient, costly and slow. In contrast,

51
online methods of talent acquisition allow more transparency among companies due to

the need to maintain a good reputation to be then able to attract more employees, reduce

costs and the time invested, and enable workers to show more skills and experience

(p.2).

Nevertheless, this new method of offering and gaining employment may also be

considered from a downside; even if it reduces costs and allows more efficient

recruitment, it makes the labor market vulnerable for several reasons:

• Companies may easily attract employees from other businesses that provide better

conditions; hence, there could be massive liquidity of workers. Because of the open

availability of data on companies and their employees, there is also no guarantee for

current employees that the ‘better-fit’ candidate that has been ‘stolen’ from a competitor

company that did not treat him or her well enough will not replace them.

• The HR segment may be harmed by the replacement of traditional HR departments

and agencies by networks and machines. The human factor is replaced by computer-

based artificial intelligence. Computers and algorithms use keywords to check resumes

and applications instead of the people themselves. In a similar way, many employers

search for potential workers on online talent platforms using some keywords to filter

candidates. This approach may ignore a lot of other suitable candidates who simply

have not included enough information about their skills and experience. As a result, to

be considered as a potential employee, a candidate has to create a resume and profile on

the online talent platforms in a way that the computer will accept, using keywords.

52
Determining future skills and training for employees

Online talent platforms serve as great tools that allow users to determine more precisely

which training and skills are needed or demanded in the labor market. Because of the

significant amount of data that such platforms generate they can predict future trends in

recruitment criteria and types of training. These networks can process the input of

employers (i.e. what skills they are looking for) from different regions, and as a result,

determine a list of skills that candidates need to acquire to be desirable in that area or on

the labor market in general, and recommend which training be completed. This is

another huge advantage for employers because they can encourage employees to follow

labor-market trends, and to get the skills needed with their own money.

Chen and Haymon (2016) suggest “for instance, LinkedIn can identify actionable trends

in regional labor markets, such as which are growing and which are waning, making it

possible to recommend related and more successful fields to users in waning industries”

(p.3). Hence, online talent networks serve to benefit both employers and employees,

because first they allow employers to specify all the skills they require, and second, they

help employees to be aware of trends and in-demand skills. As a result, through online

talent platforms, the hiring side may encourage potential candidates to develop skills

that they already have or to obtain new ones. The authors of the McKinsey report also

emphasize that “capturing this data and applying sophisticated analytics could produce

better insight into how the demand for special skills and occupations is evolving – and

in greater detail and something much closer to real time than traditional labor statistics”

(Manyika, J., et al., 2015,p.74).

53
Employers will have a wider range of choice while employees will have more

opportunities to be a ‘suitable candidate.' Also, it will allow the gap to be closed

between skills needed and the individuals that have them. For instance, the significant

growth of tech industries and E-commerce platforms has led to a huge divide between

the workforce needed in this sphere and the number of individuals that are competent

and have the demanded set of skills to complete tasks properly. Therefore, online talent

programs are linked to different training programs that exist to fix this issue by

providing certificate programs for individuals who want to obtain those skills or to

develop them. One such example is Andela, a company based in Lagos that provides

different free training programs in software development and business, and after

individuals complete the program, Andela places them in top tech companies. So, talent

acquisition platforms predetermine trends on the labor market regarding skills

demanded and provide candidates with both data about the desired abilities and training

programs to achieve them. The online talent platforms have a positive overall impact on

closing the gap between skills needed and individuals that have those skills.

To conclude, the changing nature of employment creates both opportunities and

challenges for companies. The main issue is a lack of loyalty and dedication from the

side of employees. The increasing gap between workers and companies is reflected in

the untruthful attitude of employees, and the resulting effect on total output.

However, new technologies such as online talent platforms create many opportunities

for companies because they are designed to attract freelancers, contractors, etc. Hence,

small firms, start-ups or entities that want to reduce costs may use them to find

54
temporary workers. These technologies could however be considered both beneficial

and dangerous for businesses due to the increasing popularity of online platforms, such

as Uber, that displace traditional companies from a market.

Digitalization has significantly changed the nature of talent acquisition by replacing

traditional approaches, such as newspaper posts and recruitment agencies, with online

talent platforms. These networks eliminate the need for the costly and time-consuming

recruitment process thanks to their ability to generate data about employees and

employers. Also, these platforms are linked with different training programs that may

provide candidates with various types of training. This will be beneficial for companies

as well.

Nevertheless, some issues may arise. Online talent platforms that match customers with

each other may cause the bankruptcy of many companies that provide the same

services. Also, there is the huge possibility of high liquidity of workers on the labor

market due to the easily accessible information about companies and employees. In

addition, a major risk is the disappearing human factor when choosing candidates. Even

if machines are sophisticated, they cannot fully determine whether a candidate is

appropriate for a job. People still have to include the human factor in the recruitment

process; machines are not able to take into account certain factors, and they operate by

only using algorithms that are programmed to search specific data.

55
Chapter 6

Practical part

The previous chapters analyzed how digitalization has influenced work environments,

specifically from the perspectives of employees and employers. The analysis is based

on the opinions and reports of credible authorities. However, it is still important to ask

people that work in HR management on a daily basis for their thoughts and opinions. I

decided to go outside the library, leave reports and books, and ask people who are

directly related to my topic. My first interview was with the HR Manager from the

Caspian Pipe Coating Company, Angelica Gamidova. He is working as an HR manager

for 15 years and I chose her because she saw how the labor market has been changing

during the extended period. My next interview was with the entrepreneur and professor,

Jeff Medeiros who is also speaking at the conferences about the digital entrepreneurship

and digital revolution. That was such an interesting conversation because he is a co-

founder of the start-up Iriiis, and he told me a lot of how they manage their teams in

several regions using modern technologies.

Interview #1

Participant: X

Interviewer: Firstly, I would like to thank you for allowing me to interview you. Could

you please tell me about the company you work for? For how many years have you

worked there? What does it do?

56
Participant:

I’ve worked as an HR Manager for almost ten years for the Caspian Pipe Coatings

Company. It is an enterprise that is unique in the pipe coating business in the Caspian

region, operating since 2002. HR is always a valuable asset for a company, as

experienced professionals make any business successful and company prosperous. HR

nowadays is responsible for attracting and retaining the best personnel.

Interviewer: Do you consider people a crucial resource of a company? Do they play a

huge role in the success of an entity?

Participant:

I am more than confident that people with the right qualifications are the backbone of

any organization and play a crucial role in its development and achieving the goals set

by it.

Interviewer: How would you describe the labor market today? Is it challenging to find

an appropriate and suitable candidate? What are the main issues that may occur?

Participant:

I know the labor market in Baku in detail: we select a huge number of employees from

the local market, and some specialists that cannot be found locally are recruited from

abroad. The labor market in Baku is full of young people with high levels of education

and the desire to work for large-scale enterprises, but there is a noticeable lack of

qualified people with experience. To avoid an oversaturation of young graduates in the

Labor market, many companies have special internal programs that enable them to

57
employ inexperienced people - these individual development programs grow specialists

within the organization through trainings, workshops etc.

Interviewer: Do you think that the relationships between employers and employees

have changed over recent decades? How would you describe them now?

Participant:

Sure, relations between employer and employees have become more professional. I

think that it has become possible due to the number of employees who have developed

their professional skills around the world and gained supplementary knowledge by

attending trainings, conferences, etc., where they communicate with participants, share

their abilities and take on new methods. Corporate culture has also become integrated in

local companies by international colleagues. As a result, relations made between a

company and its staff have become more professional.

Interviewer: Would you agree that employees today cannot rely upon one company

for long-term employment?

Participant:

The labor market in Azerbaijan is becoming more flexible and full of qualified

candidates year by year. The tendency of candidates to raise their knowledge and skills

encourages an employer to create a healthy environment within its organization to keep

them for as long as possible. A retention program is important as employees dedicated

to the goals and strategy of the organization makes the business thrive. Companies

58
invest in potential candidates and try to attract their interest in the company – a

developed professional will otherwise be lured to another entity. Organizations tend to

hire the best candidates and keep them for as long as possible in order to fulfill the

company’s aims. Staff that are interested in long-term contracts need to work above

their qualifications.

Interviewer: Which tools and approaches do you, as an HR manager; personally use

to find a candidate that is the ‘best fit’?

Participant:

The recruitment & selection process is one of the most important procedures in any

company. As HR Manager, I made this procedure as effective and targeted and result-

oriented as possible. Recruitment starts with a properly prepared announcement with a

clear title and job description and specific requirements for candidates; a step-by-step

approach according to the company’s internal procedure enables me to select the one

that I was looking for. I try to meet with shortlisted candidates individually and find out

more about their qualifications and personality – more than they described in their

resumes and initial interviews. Certainly, methods such as asking an unexpected

question or creating an unexpected situation gives me the chance to discover some sides

of candidates that influence the final decision.

Interviewer: How have you observed the way the Internet and new technologies have

changed the nature of employment? What are your predictions about future shifts in

the employment sector?

59
Participant:

The Internet and new technologies have widened the talent pool that we search and

made the number of candidates we select from huge. Placement of ads has become

speedy and attracting candidates easier, but an individual face-to-face interview is still

preferable and the most efficient method to get the right person for an opening. Even

though, the Internet and new technologies are faster and more effective, they do

sometimes waste our time as we try to fish out the necessary information.

It is hard to fully predict shifts on the market, but I guess we will observe more skilled

labor due do the development of technologies and education.

Interviewer: Do you agree that computerization may completely replace many

workers in the near future? If so, what effect on the labor market may it cause in

your opinion?

Participant:

I guess that the computerization processes will capture many spheres in which only

specific mechanical actions are important, but business cannot be effective without real

workers who brings their creativity to what they do. The effect of total computerization

will be tremendous; the hiring process will slow down significantly due to

automatization of some processes and a dramatic increase in the number of unemployed

people. But on the other hand, we will observe increased output by companies

providing the possibility to reduce work hours, increase vacation days, make the

pensionable age younger etc.

60
Interviewer: Do you find new technologies helpful, such as online talent platforms

(LinkedIn etc.) that allow recruiters to attract employees via the Internet?

Participant:

I find online talent platforms very useful when I need to make quick announcements

and spread them to the wider public in order to fulfill urgent vacancies. Since almost all

people have accounts on platforms such as LinkedIn, the effectiveness of hiring

qualified personnel who meet my requirements increases.

Interviewer: Does the company you work for prefer to use a traditional approach

towards employment agreements (i.e. a contract with full social and health

protection)? Or does it use new types of the employment such as freelancers,

contractors, outsourcing or crowdsourcing?

Participant:

Our company mainly uses the traditional approach since we think that such contracts

and social benefits are necessary to attract and retain skilled personnel for a long period,

and this approach makes them confident about the seriousness of the employer.

However, we do use new types of employment agreements as well, but mostly for short-

term needs.

Interviewer: Do you believe that new technologies and the Internet will increase the

quality of employees and provide better matches with employers?

61
Participant:

It depends: the person who uses these tools properly (E-learning, webinars etc.) will

increase his/her “quality” and thus will be more competitive on the labor market.

Interviewer: Do you consider new types of employment agreements to be beneficial

for both employers and workers? Or are there some who will suffer from it?

Participant:

I think that there is a win/win situation for both sides. For example, freelancers or

contractors will be more independent time-wise, since there is no need to fulfill a

minimum number of working hours for them due to local legislation. Also, a company

can spend less because it pays only for the volume of the work done.

Interview #2

Participant: Y

Interviewer: Firstly, I would like to thank you for allowing me to interview you. Could

you please tell me about the company you are working for? For how many years do

you work for it? What does it do?

Participant:

My name is Y. I am a professor of information systems, entrepreneurship and e-

commerce. I teach both undergraduate programs and MBA programs. I also speak on

62
conferences on the topics of the digital entrepreneurship, digital revolution, enabled by

everything online. Currently I am also a co-founder of the start-up that is looking to

unable people to get control of their online digital universe. We are about two month for

the release of the Iriiis. Iriiis is the name of our project. Our team is working in the

multiple regions around the world, leveraging different resources in the different

regions. We have app development in Indian, marketing and operations in Prague,

strategy finance and legal in Silicon Valley, research in New York City.

Interviewer: Do you consider people as a crucial resource of the company? Do they

play a huge role in the success of the entity?

Participant:

The number one resource of any company is the people. This is it, full statement that

does not any additional explanations. Some people think that you can substitute people

by automation; you are a fool if you think that you can replace creativity, or find a

solution to previously unseen problems with technology. Doubtless, machines may

substitute many humans, but obviously, machines cannot do more than they are

programmed to do. Therefore, machines may substitute only employees whose work is

not related to intelligence or thinking. However, when we are talking about intelligent

work and adding value to the company, people are the best resource for doing these

things.

Interviewer: How would you describe the labor market today? Is it challenging to find

an appropriate suitable candidate? What are the main issues that may occur?

63
Participant:

It is a very good question. The labor market is undereducated, under skilled, and under

challenged. Too many people are given tasks that are mind numbing. We kind of stuck

in the place people are doing mindless job that are not fulfilling. The real problem is

that in the future people have to do more than computers. They have to shift their skill

set.

For instance, McDonalds now employ people to get burgers flipped, however, in the

future machines will do that. So, those people are at risk of unemployment. Those

people have to improve themselves. To be able to do a job that robot cannot do, people

have to educate themselves. The skill gap is increasing dramatically fast. People-skills-

education.

Interviewer: Do you think that the relationships between employers and employees

have changed during several decades? How would you describe them now? Would

you agree that employees today couldn’t rely upon one company for the long-term

employment?

Participant:

My dad who is a very wise businessman usually tells me “we are now in the generation

of me Inc.” meaning that “ I am my own business, and it is my responsibility to develop

my skills.” You are totally responsible for your employability. There is no loyalty in

both sides. It is not a big thing. Who does the best job keeps the job. As long as you do

not look at it negatively this is the opportunity. If you are looking for the job for life you

will probably be disappointed. If you get laid off you should not be depressed. Go and

do what you want. Furthermore, it is global. Before companies had captive audience.

64
Now when everything is online, no longer you are captive for the company you are

working for. There is a hyper reorganizing. The relationships are endless. This is the

beauty to both sides of the equation: employees and employers.

However, I can imagine why many people want to have one stable job, and why they

are afraid to lose it. I am considering my own country United States of America as an

example. One of the benefits that companies provide to employees is the health

insurance, comparing to Europe where the government provides the health insurance, it

may be seen very negative. People are stick to the employers in US because they are

afraid to lose their insurance that may be crucial for them or their family members.

Hence, they are usually in the stage of anxiety and are afraid to quite their jobs or to be

fired. Those reasons affect people’s perception of work, and increase their desire to be

employed in one company for a long time. They want to save a “safe net”.

Interviewer: Which tools and approaches do you, as an HR manager; personally use

to find the ‘best fit’ candidate? Do you find helpful new technologies such as online

talent platforms (such as LinkedIn) that allow attracting employees via the Internet?

Do you think that new computerized ways when the algorithms used to sort of

candidates may lead to losses of good candidates?

Participant:

I prefer both old school and new school. Why? Why would you limit your access to the

next great resources? It is a super set. Most people are old school. You really have to

integrate old school with new school because the new technologies are fascinating.

Considering your question about the “sorting methods of computers”, there is a number

65
of issues such as combination of the large database and data issues. You cannot

interview 1000 people. So, you have to allow computers to somehow sort those

candidates. The smart thing that you can do is to develop the program itself. It is also

smart to spend some time following your intuition, and making connection to the

communities of people where talent may exist. Don’t miss human element. I personally

use my teaching time as an opportunity to access those resources.

Interviewer: So, you have said that your company is spread to several countries, is it

difficult to manage the company that has its part in different locations?

Participant:

It is difficult. It is fun challenging. Cultural norms and work environment norms are

different from region to region. Although you can impose some normality or global

consistency you have to be careful to deviate too much. For instance, Indians do not

show up to work earlier than 10 a.m., but than could stay till night, ten years ago I

would encourage them to start working day at 8 a.m. because it is more common in the

Western countries; however now I realize that this is cultural difference and I have to

accept it.

Here Hofstede’s study comes. It is crucial to consider cultural differences when

managing people. The beauty of this generation is that you can work whenever you

want, you can work in different countries and find workers all over the world. People

have an opportunity to be educated, mobile, and dynamic.

66
Conclusion and Discussion

7.1 Conclusion

To conclude, trends such as digitalization significantly change the nature of

employment, creating both challenges and opportunities for companies and workers.

However, as has been discussed in this paper, digitalization is the main cause of the

increasing gap in the relationships between employees and employers. The new types of

employment may be seen as beneficial at first glance, however, after deeper analysis,

obvious issues appear that can significantly harm employees. Freelancers, contractors or

other representatives of the new types of employment, lack the feeling of being part of a

company, and do not have fair conditions because there are no scheduled office hours,

benefit protections and health insurance. It is assumed that a flexible schedule and

limited number of tasks are advantages for these types of employees; however, these

conditions remove the responsibilities on the part of employers to provide workers with

office space or social and health insurance. In addition, employees cannot distinguish

between the time they have to spend on their work and the time they are not working.

They have to be constantly online to be in touch with employers, and cannot live with

their mobile or Internet turned off. These conditions create an unhealthy atmosphere

and may lead to issues with mental health, as well as problems in communication with

people that surround those workers. There are no regulations for these new types of

employments; hence, there are no legislative norms for employers that they have to

follow. So, it could be argued that employers have fewer responsibilities with these new

types of workers because they can even be in different locations, and their relationships

are founded only on a ”do-task-get-money” basis, while there is no corporate culture

involved. This may negatively affect the company as well because before

digitalization’s effect on the nature of employment, workers were prone to stay at one

67
company for a long period of time (even their entire careers). However, today it is very

rare that someone is employed for decades. Employees change companies, and

companies prefer to replace or fire workers that they do not need any more. As a result,

the mental relationships between employers and employees are becoming more

distance, and workers are not dedicated to the company’s goals because they realize that

they can be laid off at any time. Hence, the shifts in the nature of employment that have

occurred due to digitalization may also negatively reflect on employers.

There are many positive aspect of digitalization that it has brought to workers and

employers. The Internet allows employers to hire people from different locations, use

robots to complete some tasks, reduce costs and find more talent via online platforms.

However, digitalization also breaks the employment sector into the small gigs, and

employees cannot rely upon one employer but have to constantly be searching for new

jobs. This distance relationships between employers and employees is reflected in a lack

of loyalty from workers towards companies. As a result, both employees and employers

may experience negative consequences of digitalization in the employment sector.

68
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